Federal Court: July 2025

UNFAIR CONTRACT TERMS

‘Tell us if anything changes while you’re insured with us’ – transparency of impugned term – role of Insurance Contracts Act 1984 (Cth) when assessing unfair contract terms

In Australian Securities and Investments Commission v Auto & General Insurance Company Ltd [2025] FCAFC 76, the Full Court of the Federal Court of Australia (Derrington, O’Bryan and Cheeseman JJ) considered whether a term of an insurance contract which required the insured to ‘[t]ell us [the insurer] if anything changes while you’re insured with us’ was an unfair contract term within the meaning of section 12BG(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’) and thus void under section 12BF(1) of the ASIC Act. They decided it was not. In the course of doing so, the joint judgment of O’Bryan and Cheeseman JJ provides useful guidance on how the transparency of an impugned term (a mandatory consideration in the alleged unfairness of a contract term) is to be taken into account when determining unfairness.

Background

Between 2021 and 2023, Auto & General Insurance Company Limited (‘A&G’) entered into approximately 1,377,900 home and contents insurance contracts which contained the following clauses (together, the ‘Notification Term’):

Tell us if anything changes while you’re insured with us.

While you’re insured with us, you need to tell us if anything changes about your home or contents.

If you don’t tell us about changes, we may:

* refuse to pay a claim             * cancel your contract

* reduce the amount we pay      * not offer to renew your contract.

The term also provided various ‘[e]xamples of changes we want you to tell us about’, such as ‘[y]our insured property or address for contents changes’, ‘[p]aying guests stay in your home, for example Airbnb, Homestayz’, ‘[y]ou are moving out and rent your home to tenants’ and various other examples. As with other terms of the Product Disclosure Statement, the Notification Term was expressed in plain language and a non-legal style with the aim of being more comprehensible to consumers.

The ASIC Act contains various consumer protection provisions in respect of financial products and financial services. In this respect, it is the counterpart of the Australian Consumer Law, which contains equivalent consumer protection provisions in respect of other goods and services. Relevantly, where a contract is a ‘consumer contract’, s 12BF(1) of the ASIC Act renders void any term of a consumer contract that is an ‘unfair contract term’. Section 12BG(1) provides that a term is unfair if it meets all three of the following criteria:

• it would cause a significant imbalance in the parties’ rights and obligations under the contract;
• it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
• it would cause detriment to a party (financial or otherwise) if it were to be applied or relied on.

As to the second of these criteria, a term is presumed not to be reasonably necessary to protect the legitimate interests of a party unless the party proves otherwise (s 12BG(4)).

In determining whether a term of a contract is unfair, the Court may take into account such matters as the Court thinks relevant but must take into account the extent to which the term is transparent and the contract as a whole (s 12BG(2)). A term is transparent if it is expressed in reasonably plain language, legible, presented clearly and readily available to any party affected by the term. There was no dispute that the home and contents insurance contracts at issue in this case were consumer contracts under the ASIC Act, and that the provisions as to unfair contract terms were capable of application to the home and contents insurance contracts.

When the legislation on unfair contract terms was first enacted in 2010, it explicitly did not apply to contracts of insurance. This exemption was removed in 2019 in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (commonly known as the Hayne Royal Commission). Insurance contracts had been, and continued to be, subject to the provisions of the Insurance Contracts Act 1984 (Cth) (‘IC Act’), which also had the protection of consumers of insurance as one of its purposes. Once the unfair contracts regime became applicable to insurance contracts, the interaction between the various consumer protection provisions of the ASIC Act and the IC Act became a question ripe for judicial consideration, including the relevance of section 13(1) of the IC Act, which implies into every contract of insurance a provision requiring the contracted parties to act towards one another, in respect of any matter arising under or in relation to the contract, with the utmost good faith.

At trial, Jackman J found the Notification Term was to be construed as a commercial contract, which did not require considering what an ordinary consumer would have understood it to mean, and his Honour construed the Notification Term as requiring the insured to notify the insurer if there was any change to the information about home and contents disclosed by the insured prior to entry into the contract. His Honour thus found the Notification Term was not unfair within the meaning of s 12BG(1). ASIC appealed on the grounds that the trial judge’s construction of the Notification Term was erroneous, that the trial judge failed to take into account the transparency of the Notification Term in assessing whether it would cause a significant imbalance between the parties’ rights and obligations, and had failed to take into account the transparency of the Notification Term in assessing whether it was reasonably necessary to protect the insurer’s legitimate interests.

Decision

The Full Court dismissed the appeal. As to the erroneous construction of the Notification Term, the Full Court found for ASIC on this ground by majority (O’Bryan and Cheeseman JJ; Derrington J dissenting); as to the other two grounds, the Full Court was unanimous in finding against ASIC.

As to the proper construction of the Notification Term, the majority found the trial judge’s starting point for construction was wrong (at [103]-[104]). First, it is not correct that all insurance contracts are to be construed as commercial contracts; rather, it will depend on whether the insurance is being provided in a commercial context. Here, it was not as it was domestic insurance for home and contents. Second, the orthodox approach to contractual construction requires a term be construed objectively according to what a reasonable person in the position of the parties would understand the term to mean. Here, that does involve considering what an ordinary consumer would understand the Notification Term to mean.  The trial judge’s construction of the Notification Term was also, itself, wrong. Rather than being directed to the insured’s obligation to notify the insurer of any changes to the insured’s pre-contract disclosures, the proper construction, after consideration of the text, context and purpose of the Notification Term, was that there was an implied condition of materiality to the insured’s notification obligation, such that an insured was obliged to notify the insurer of any material changes to the risk insured (at [114]-[118]).

However, it did not follow that the Notification Term was necessarily an unfair contract term, and so void. The majority re-examined the question of whether the Notification Term, as properly construed, was unfair and found it was not. On its proper construction, the Notification Term did not create a significant imbalance in the parties’ rights and obligations:

 ‘If circumstances occur during the term of the contract that materially change the insured risk, that involves a change to the main subject matter of the contract.  To require an insured to notify the insurer of such circumstances, and to confer on the insurer the right to cancel the contract if they are not notified of such circumstances, does not cause a significant imbalance in the parties’ rights and obligations arising under the contract’ (at [147]).

Further, the Notification Term, properly construed, was reasonably necessary to protect the insurer’s legitimate interests (at [176]). Thus, neither the first nor the second criteria of an ‘unfair contract term’ were made out in respect of the Notification Term.

As to the relevance of the transparency of the Notification Term, the term did not lack transparency merely because it was possible to formulate constructions of it which differed from its proper construction:

‘The mere fact that alternative constructions of a contractual term can be formulated does not lead to a conclusion that the term lacks transparency’ (at [146]).

Moreover, because ASIC conceded the Notification Term ought to be construed according to the materiality criterion, ASIC was taken to have conceded that is how a reasonable person in the position of the insured would understand the Notification Term, such that there could be no relevant lack of transparency as to that construction (at [174]). The trial judge had considered the issue of the transparency of the Notification Term and, although he had done so after considering the three criteria of unfairness, the Court held there was no particular order in which transparency must be considered as long as the statutory test of unfairness was ultimately applied; thus, there was no error below in respect of the issue of transparency, and whether the Notification Term created a significant imbalance between the rights of the parties to the contract or was reasonably necessary for the protection of the legitimate interests of the insurer.

On the question of the interaction between the ASIC Act and the IC Act, the majority held the effect of the statutory duty of good faith under s 13(1) of the IC Act was not to alter the proper construction of the Notification Term, which should be construed on its own terms and be assessed for unfairness under the ASIC Act accordingly. Rather, s 13(1) imposes an obligation on how the parties’ contractual rights are to be exercised (at [144]). Without expressing a concluded view (because the point was not argued on appeal), the majority indicated it was not difficult to accept that the statutory duty of good faith under s 13(1) was part of ‘the contract as a whole’ which the court must consider when determining whether an impugned term is unfair under the ASIC Act. While the existence of the statutory good faith term might reduce the circumstances in which a term of an insurance contract might be found to be unfair, it clearly could not simply eliminate it as the ASIC Act had been amended to render the unfair contract terms provisions applicable to insurance contracts, notwithstanding the pre-existing statutory good faith obligation under the IC Act. Moreover, the Explanatory Memorandum of the IC Act had made clear that both the unfair contracts regime and the statutory duty of good faith were to operate separately on insurance contracts. In the instant case, however, since the properly construed Notification Term was not unfair on its own terms, it did not fall to be considered whether any of the provisions of the IC Act might ‘save’ the validity of the Notification Term by counterbalancing any facial unfairness.

Generalised language still risky

Although the Notification Term was ultimately found not to be an unfair contract term in the instant case, the Full Court’s decision should not be read as an indication that generalised language such as ‘[t]ell us if anything changes while you’re insured with us’ will necessarily avoid being found to constitute an unfair contract term in any other contract. Every contract falls to be considered on its own terms, including the construction of the impugned term. In the instant case, much turned on the specific construction of the Notification Term for which ASIC had contended in the instant case, and the consequences which flowed from that.

Furthermore, prior to 2021 and then subsequent to 2023 (i.e., on either side of the period in question in this case), A&O’s standard home and contents insurance included an equivalent of the Notification Term which instead listed specific categories of information in respect of which changes had to be notified. Much costly litigation might have been avoided if the generalised language of ‘[t]ell us if anything changes while you’re insured with us’, however well-intentioned, had not been deployed. Practitioners advising suppliers of goods and services that are subject to the unfair contracts regime might well eschew such generalised language in contracts in the future.

ESTOPPEL AND CONTRACT

Equitable estoppel arising from oral representations – breach of oral agreement – application of Kramer v Stone

The case of TJ & P Pty Ltd as trustee for the Post Family Trust v Agrinova Pty Ltd (No 3) [2025] FCA 587 (‘TJ&P’) provides guidance on the application of the principles of promissory estoppel and breach of contract in circumstances where the alleged representations are made orally. Given the complexity of the case, both in terms of its factual matrix and the detailed examination and application of legal and equitable principles, this case note will primarily focus on the estoppel aspects of this case following the recent High Court decision of Kramer v Stone [2024] HCA 48 (‘Kramer v Stone’).

Background facts

The complete facts giving rise to this case are too voluminous to adequately summarise here. For the purposes of this case note, however, a brief summary is provided below.

On or about 25 November 2014, Mr Van Vlymen and Mr Patrick Wong entered into a contract (‘Wong Contract’) in which Mr Van Vlymen agreed to purchase Mr Wong’s shares in a company called Overseas Shipping Trading and Investment Pty Ltd (at [18]).

Following Mr Van Vlymen’s inability to obtain finance to complete the purchase of the shares, Mr  Wong commenced proceedings in the Supreme Court of New South Wales in 2015 against Mr Van Vlymen and various corporate entities, seeking an order for specific performance of the Wong Contract (at [20]).

On 13 September 2016, the Supreme Court made orders to appoint Mr Christopher Darin of Worrells as receiver and manager of Mr Van Vlymen’s real property interests (at [29]).

On 23 September 2016, Mr Darin commenced proceedings in the Supreme Court, seeking orders under section 66G of the Conveyancing Act 1919 (NSW) to be appointed as trustee for sale of real property owned by Mr and Mrs Van Vlymen (at [30]).

On 5 October 2016, Stevenson J ordered Mr Nicholas Malanos and Mr Darin be appointed as trustees for the sale of that real property (at [31]).

On or about 4 November 2016, Mr and Mrs Van Vlymen entered into the November 2016 Deed with Mr Wong, Mr Darin and others (at [33]). The effect of the November 2016 Deed was to stay both the 2015 and 2016 Supreme Court proceedings, halt the sale of Mr Van Vlymen’s real property interests in properties located at Bayview and Kulnura, and allow Mr and Mrs Van Vlymen and their related entities further time to pay the amount owing to Mr Wong (at [34]).

On 4 and 9 November 2016, Mr and Mrs Van Vlymen paid a total of $120,000 to Mr Wong pursuant to the November 2016 Deed (at [35]). Mr and Mrs Van Vlymen were unable, however, to secure sufficient funding to discharge the balance of the November 2016 Deed by 28 February 2017 and were in breach of the deed from that date (at [36]).

Court findings

Estoppel case

At trial, the applicant contended an individual named Mr Matthew Hogg made representations on behalf of respondent, Agrinova Pty Ltd (‘Agrinova‘), to Mr Van Vlymen at a meeting held on 30 October 2018 and in letters sent on 12 July 2019, 23 December 2019 and 2 April 2020 that Agrinova would (at [261]):

1. pay the outstanding balance owing to Mr Wong pursuant to the November 2016 Deed (‘first representation’);
2. pay the fees and expenses required to retire the receiver (‘second representation’);
3. pay the legal fees and expenses that Mr and Mrs Van Vlymen would incur to finalise matters regarding their obligations under the November 2016 Deed (‘third representation’); and
4. allocate units in the Agrinova Unit Trust to Mr and Mrs Van Vlymen or their nominee (‘fourth representation’).

Goodman J referred to the recent High Court decision of Kramer v Stone where the plurality described the requirements of equitable estoppel which arises by reason of encouragement from a promise (at [273]). Those requirements are:

• a ‘clear and unequivocal’ promise made by the party estopped (‘the promisor’) to the party who relies upon the promise (‘the promise’) (Kramer v Stone at [37]);
• a reasonable person in the promisor’s position must have expected or intended (or the promisor actually did expect or intend) the promisee would rely upon the promise by some action, omission or course of conduct (at [38]);
• the promisee must have relied upon the promise by acting or omitting to act in the general manner that would have been expected (at [39]); and
• the consequence of the promisee’s reliance must be that the promisee will suffer detriment if the promise is not fulfilled, in the sense that the promisee will be left in a worse position, as a consequence of reliance upon the promise, than if the promise had not been made (at [40]).

In regard to the purported oral representations made at the 30 October 2018 meeting, Goodman J noted the comments of Hammerschlag J (as the Chief Judge in Equity then was) in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 (‘John Holland’) at [94] and the need for a party who seeks to rely upon spoken words as a foundation for a cause of action to prove the conversation to the reasonable satisfaction of the court such that ‘the court [would] feel an actual persuasion of its occurrence or its existence’ (TJ&P at [279]).

Subsequently, Goodman J found he was not persuaded the alleged representations were made by Mr Hogg on behalf of Agrinova at the 30 October 2018 meeting (at [288]-[289]).

In contrast, Goodman J made the following findings in relation to the letters:

• the letter dated 12 July 2019 contained ‘an unequivocal and clear representation by Agrinova to Mr Van Vlymen via his solicitors that Agrinova was in a position to satisfy the outstanding amount owed to Mr Wong’ and ‘amounted to the making of the first and second representations’ (at [291]);
• the letter dated 23 December 2019 was an ‘unambiguous repetition of the first and second representations’ (at [293]-[294]); and
• the letter dated 2 April 2020 was ‘a further unambiguous repetition and confirmation of the first and second representations’ (at [296]).

His Honour found, however, he was not satisfied Agrinova made the third or fourth representations (at [300]).

In regard to the first and second representations (together, ‘the promise’), Goodman J found he was satisfied that:

‘Agrinova actually expected or intended Mr Van Vlymen to rely upon its promise; and a reasonable person in Agrinova’s position must have held such an expectation or intention’ (at [303]).

His Honour also found that:

‘Mr and Mrs Van Vlymen acted in reliance upon the promise, by acting in a manner that would have been expected, when Mr Van Vlymen … took steps in early March 2020 to relist Supreme Court proceeding 2015/60753 and filed the notice of motion of 26 March 2020 in order to determine the amount owing to Mr Wong’ (at [307]).

Finally, his Honour found that:

‘Mr and Mrs Van Vlymen plainly suffered detriment in reliance upon the promise, principally a liability for legal fees incurred in connection with the re-agitation of Supreme Court proceeding 2015/60753 for the purpose of determining the amount owing to Mr Wong. They were also exposed to a potential liability (which subsequently crystallised) for legal fees incurred by Mr Wong in his response’ (at [327]).

In regard to the amount of compensation to be awarded, his Honour found ‘the relevant detriment is limited to the fees for which Mr Van Vlymen became liable in Supreme Court proceeding 2015/60753 between about early March 2020 and 19 May 2020’ (at [336]). His Honour found this was in the amount of $585,000 (at [354]).

Contract case

The applicant also asserted breach of an oral agreement allegedly reached at the October 2018 meeting (at [357]-[359]). In summary, the terms of the alleged oral agreement were that Agrinova would:

1. pay the balance of the November 2016 Deed to Mr Wong;
2. pay the fees and expenses to retire the receiver;
3. pay Mr and Mrs Van Vlymen’s legal fees and expenses incurred in finalising their obligations under the November 2016 Deed; and
4. allocate units in the Agrinova Unit Trust to Mr and Mrs Van Vlymen or their nominee (at [357]).

After referring to the applicable principles for proving the existence of a binding oral agreement (at [361]) and citing those principles in detail from the decision of Richards v Han [2022] FCA 1539 (at [97]-[98]), Goodman J found he was ‘not satisfied that the contended agreement was made’ (at [364]-[370]).

Dr David J. Townsend is a barrister in 3rd Floor Wentworth Chambers. Michael Morgan is a barrister in 13^th Floor St James Hall.